Nick Desai is an accomplished and visionary entrepreneur who has started and led four venture-funded start-ups over the last 18 years. Nick is the Co-Founder and former CEO of Heal, an on-demand doctor house call app available in Los Angeles, Orange County, San Francisco, and San Diego. For Nick, Heal is more than a company – it’s a mission to fix the broken $3 trillion healthcare system.
Nick’s previous start-ups have been innovative leaders in technology-enabled fitness and weight loss, social media and mobile applications, and the web’s first self-updating address book.
Nick earned his BS in Electrical and Computer Engineering from UC Irvine, where he is in the Engineering Hall of Fame, and an MS in Electrical Engineering from UCLA. Nick is on the board of the UC Irvine Alumni Association and the Los Angeles Chapter of the American Heart Association.
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Could Heal’s House Call App Make Office Visits Obsolete? With Nick Desai
Our guest on Episode 12 is Nick Desai. Nick is a serial entrepreneur. He cofounded Heal as the Founder and CEO. Heal enables physicians to make house calls to the patients that need it most. The company raised over $100 million from one of the largest commercial payers in US healthcare. I hope you enjoy the episode.
Our guest is Nick Desai. Nick is a serial entrepreneur in the healthcare space. His first company was Fit Orbit. He was the Founder and Adviser of Heal, a telemedicine company providing house call medicine for every home. Nick did his education at UC Irvine where he earned a Bachelor’s degree in Electrical and Computer Engineering. He went on to earn a Master’s of Science at UCLA. Nick, I’m so glad to have you on. Thanks for being on the show.
I’m very excited to be here. It sounds like a great show.
As you probably know, this show is focused on people like you. It’s healthcare builders, entrepreneurs, and all the people that help us build the solutions for healthcare. I’m curious. The first company that we discussed was Fit Orbit. What was your first entrepreneurial venture going back to even as early as your childhood?
Ignoring the lemonade stand I had when I was eleven years old, I got that lemonade and candies chain where I got the neighborhood kids to buy candies from the store and mark them up to sell them back to other neighborhood kids. Heal was my fourth investor-funded startup. I’ve been doing them since 1998 all around the premise that we should use technology and tools like the internet and smartphones to make life better and easier, and remove that little friction in a way that Uber does so I don’t have to look for parking, or Grubhub does so food shows up to my house, or Netflix does so my kids can all watch their favorite cartoons, or whatever the case may be. I’m 24 to 25 years in doing this.
That makes a lot of sense. If you think back to your first entrepreneurial venture, what year was that? What was the technology that was taking the friction out of an experience and making life better?
That company was called Zkey. It was the web’s first self-updating address book. I started it in 1998. It came out of a real thing. I was a single guy at the time. I tried to call an old girlfriend thinking I would reconnect. Her phone number changed. I was like, “There’s the internet. Why should I have her phone number instead of access to her phone number?”
In many ways, it was a precursor to what we see on LinkedIn or Facebook now. That was our first company. All of them have come out of personal needs. When I started Fit Orbit, the idea was I was getting married at the time to my wife, Renee. I wanted to get in shape and I wanted her to build an online weight-loss coaching tool for regular people who look like me and don’t look like bodybuilders to get in shape.
With Heal, we had an infant son who we took to the emergency room because we couldn’t get ahold of his doctor. We came home eight hours later and said, “There has to be a better way to see a doctor.” We created doctor house calls using a smartphone app. As a point of clarification from your intro, I’m now the Founder and Advisor to Heal but I founded and served Heal as CEO for six and a half years ending March 1, 2021.
Going back to that, I see the arc that you have a personal problem that you see in your life. Do you do a lot of research and say, “Am I the only person with this problem?” Do you have your personal conviction and go for it?
With Heal, it was an idea that I didn’t need to do any research on. Everyone hates going to the doctor’s office. Even the people who work at doctor’s offices hate going to the doctor’s office. I’ve never met anyone in my life who said, “I look forward to going to the doctor’s office.” With that, I was convinced that there was a universal need. With Fit Orbit and Zkey, I did enough research to make sure it was a big problem because I’m not interested. Let me be clear when I say this. There are a lot of companies that make a lot of money doing incremental improvements.
Before Salesforce, there was this. Before this, there was that. Contact management and CRM tools have been around forever. Salesforce took it to the next level, but I’m interested in solving big problems. It’s what Uber did for transportation. I always use this. It’s what Airbnb did for hospitality, what Grubhub and Seamless did for food delivery, and what Netflix did for content consumption, which changed the way we live our lives. People are watching content more often, and more interesting and diverse stuff because of Netflix.
They started with getting CD-ROMs mailed to you. Their business took off when mobile broadband reached a critical mass where you could stream. There have been some great books and articles written about how bold that decision was. If you go back to 1998, I got my first cell phone in ’99. It was a big Nokia brick. What were you using digitally? What electronic device did you refer to find that you had the wrong number for your ex-girlfriend?
It was a mobile phone. I had a little LG. It was tiny. I still love the tininess of those phones. It was a flip phone with a little camera in it and an address book. By then, I already didn’t have a landline phone. I had moved in with my brother. I wanted to find a new place. I gave up my old place and moved in. I was sleeping on his floor, and then I had this idea. I ended up building this very well-funded company while I was staying on the floor in his living room for three years because I was so busy. I didn’t have time to find a place.
The realization I had that I distinctly remember is people called back then the landline phones the home phone, but they called their cell phone “My phone.” That difference was a critical tectonic shift in the way people thought about personal communication devices. That revolution was beginning. No one foresaw the merger of the smartphone with the internet. That explosion was still a decade away but that was a realization. These were personal devices. People expected the immediacy of the internet on a personal device.
In 1998, dot-com was heating up. You said Zkey was well-funded. How did you go about raising capital? Did you have any experience with VC? What was that like for you as a first-time founder?
Honestly, I hadn’t had any venture capital raising experience. I talk to a lot of entrepreneurs and tell them, “Nowadays, you have it so easy. You don’t even know it.” All humans who want to start a company can have it so easy relatively speaking because you can Google search and find the VCs in your industry. You can find the name of the right partner and their email address. You have LinkedIn to contact them. There are all these online and in-person seminars.
There was one venture conference a year in Los Angeles. I went there in person. I didn’t have the money to register for the conference, so I waited outside. When the VC came off the stage and came out the back, I accosted the guy figuratively. I said, “I’ve got to get a meeting with you.” You call and you speak to a human assistant and leave a voicemail. They call you back and leave a voicemail. You get a meeting. My first term sheet was faxed to me on a fax machine.
I didn’t know what a term sheet was and all that. I didn’t know any of those things. We rolled with it. You read and learn. There were books about it. Now, there are all of these things. There’s no excuse not to be able to get in front of investors to be able to pitch them or create a great pitch deck. As an entrepreneur, you can focus on your story of what makes your company better and different. All the other stuff is out there. You can download high-quality sample term sheets that are very close to what a VC would do from the internet.
There are SAFE notes. It’s a great point. You get that first term sheet in taking your first venture round. How long were you building Zkey? How close you were to accomplish your goal of solving this problem?
We built the platform up to almost a million active daily users. Back then, that was a pretty big deal. We had an opportunity to sell the company. It goes back to the first dot-com crash. You’re too young to remember that. In 1990 and the years 2000 and 2001, there was a dot-com crash and a market meltdown. After the board decided not to sell the company, I left a little while later. I did some consulting work, took some time off, then started my next company and so forth. I did a lot and learned a lot. It was great in that context. Did I become a zillionaire with an exit? No, I didn’t but I had an incredible experience. It’s one that said, “I want to do this again.”
There were a million daily active users that early in the mobile build. You’re very kind. I was raising money in 1999 and I graduated in 2000. I wasn’t far behind you. I’m not quite as savvy but I can relate. Also, the timing wasn’t great to be looking to sell a business around then. What’s the inspiration? You’re getting married to Renee. You want to get fit. At that time in 2008, what were the technological foundations that you were building from? You have broadband. Was mobile a big part of your strategy?We should use technology and tools like the Internet, mobile, and smartphones to make life better and easier. Click To Tweet
Yeah. The first generation of the internet was about two things. It’s commerce and content. I could find the news on the internet and buy stuff on the internet. Amazon came out and with Google, I could search and read stuff. The second generation of the internet by the time 2008 comes around was about how you have to build for mobile and connect you to people. That’s when social media exploded. It wasn’t when it was created.
Myspace and Facebook go back farther but it was one that exploded because these platforms like LinkedIn, Facebook, and all of these things had their meteoric rise. The context of Fit Orbit was to connect you to a real human personal trainer over the internet for $10 a week and build a service where a trainer could guide you without you having to go see the trainer and be intimidated in the gym, to get all the benefits of a trainer, and for that trainer to fan out their services.
In a weird way, it’s a precursor to so many of these marketplaces like Fiverr and this and that. If you’re a musician, handyman, cook or chef, you can get a gig to come and do something for some money. This was a two-sided marketplace that enabled trainers to monetize the revenues from clients who wanted to lose weight but do it online. It’s very much in the mindset of that second generation of the internet.
I understood the connectedness. We had a previous guest, Holly Rilinger. She talked about a platform that she has launched. She is somebody that came up through Flywheel, Peloton, and in-person community-style fitness. When pushed into shelter–in place, she tried to do what you did much earlier with Fit Orbit. When I think of health and fitness, there are a lot of brands and competition. Were there other companies that were broader-established in fitness that you were competing with? How did you navigate brand recognition in a market that is so saturated?
The interesting thing about what you’re asking is that the fitness industry is very prone to fads. There were all the infomercials of the ’80s and ’90s. There was Suzanne Somers and the ThighMaster, and what they call exercise. There were all these guys, ladies, exercise, bikes, Jane Fonda this and yoga that. It then went to these big gyms that kept getting bigger like family fitness, 24-hour fitness, Equinox, and LA Sport.
From Planet Fitness at the low end of the price point to Equinox at the high end, they got more juice bars and socialization. It then went to these classes. There were spin classes, yoga classes, and yogalates classes. It’s back to equipment in the home, but much more advanced equipment. It’s bringing in some of the social elements so that your screen is connected to other people or an instructor or competing for points or Pelotoning against other people.
It will be interesting to see what the next trend is. For us, brand-building was a tough thing. It’s especially tough. The reason why there are so many fads is that there’s a group of Americans, 10% to 20% who are fit like yourself. They probably have a routine. They stay in shape and had figured out what works for them. They eat right or exercise a certain way. Whatever works for them, they keep doing. They’re organically self-motivated to drive fitness.
The rest of America are people who will not get in shape. A few of them will transcend but the rest of the 75% either will never even try because they don’t care. They try and go from this to that. I’m in that camp. Their weight goes up and down like a yo-yo. As much as I would love to be, it’s not something that I’ve ever found enjoyable. The reason that brand is important is that you want to catch the wave of the moment.
There was Body by Jake, Beachbody, South Beach diet, and paleo. Everyone comes out with a new way. What is the promise of that new way? “This is easier and better. You have to do less but you will gain more, as in losing more weight more easily and quickly.” It’s the little bands that you wear that zap you into losing weight, but the reality is that the only way to lose weight is to eat better and exercise. That’s it.
What we tried to do with Fit Orbit is speak to that reality, but make the story very personal about real people who could use this tool to achieve goals. We did brand affiliation with Jenny Craig, Body by Jake, and a fitness personality known as Jackie Warner who had a show on Bravo, and with Bethenny Frankel who owns Skinnygirl. She was one of the Real Housewives. She built a fitness brand from that.
We did a lot of brand partnerships to leverage the brands that could help us sell Fit Orbit to the people. The most important learning from that company was how hard it is to sell fitness to people beyond the week of New Year’s resolutions. The entire industry is based on one of two things. It’s selling a very high-priced piece of equipment into your home or breaking it. The whole gym membership model is an example. Ten thousand people would join and forty people would show up.
You have the lifetime value for the Peloton model. You get as much of it as you can in the initial upfront purchase. You churn and maybe in 6 or 9 months, you’re okay. What was your churn at Fit Orbit when you were charging weekly? Was that a novel pricing model?
It was. What we did was it was $30 a week if you bought it week-to-week, but it was $10 a week if you prepaid for six months. There were all kinds of gizmos and tchotchkes you got for prepaying for six months. That’s what we focused on because that six-month was the sale.
If you could get one, is that $240 over the course of six months? Did that cover your customer acquisition costs? How would you acquire a customer?
We acquired customers through those brand partnerships, search engine marketing, social media, word of mouth and referrals from our trainers. It is a tough industry to succeed in. I admire those who have. I do because what Tonal, Peloton, and ClassPass have done appeals to an affluent demographic. What they have done is build great success. We didn’t achieve that success with Fit Orbit.
Ironically, it’s better suited now because there are so many services that are self-help like LegalZoom. You can come and get all the documents, but if you want to talk to a lawyer, you can do that now. That’s an upsell. You can use QuickBooks but if you want to talk to an accountant, it’s the bookkeeping service. They learn to upsell services. Ironically, it’s better suited for now but it doesn’t have the cool factor of a shiny new gadget that you get and “All my friends are doing it.” That was a fundamental flaw in a model that albeit it worked, it required you to do the work.
With that backdrop, I see the arc here. This makes total sense. I can relate to and admire the serial entrepreneur. Your infant son needed to go to the ER.
That was 2014. After six years at Fit Orbit, I started thinking about this idea with my wife and then created the company.
Was Renee involved in building out Heal?
Yeah. We went home in an Uber that night. We had this idea that if I can Uber, why can’t I get a doctor to come to my house? She’s a practicing nephrologist and I’m an entrepreneur. I went and made a little mock app. It wasn’t working. I showed it to her and said, “What do you think of this?” She’s like, “This is a billion-dollar idea. We should do this.” We were both in. It is a billion-dollar idea.
The most important thing that happened in the third generation of connected services is we went away from the browser as the interface to the phone as the interface. That allowed us to use location in the personalization and integration of all these services. Still, most services that come to your house are equal to or slightly less than the expense of going there.
If a book comes to your house from Amazon, it’s the same book. It’s not worse but it’s not better. Maybe you want it on the same day. Now Amazon delivers a lot of stuff on the same day. The point is you could go buy it at a bookstore on the same day but you don’t have to drive. It comes to your house the next day. If you order food from Grubhub or watch a movie on Netflix, it’s great but you don’t have a 100-inch THX Dolby system in your house.The goal of a doctor should not be to see as many patients as possible per day. The goal should be to improve the health of each patient they see in a quantifiable way. Click To Tweet
The food comes in little cardboard containers. You still have to clean up the plates. The kids still spill on the floor. You ordered extra cheese and they put no cheese and all of these kinds of things. When a doctor comes to your house, it’s not just more convenient. In these services, you’re trading convenience for a little bit diminished experiences with or a lack of immediacy.
When a doctor comes to your house, it’s not just more convenient. It’s fundamentally better healthcare because the home is the only place where a doctor can truly assess the social determinants of health, the fall risk, the behavior, the smoking, what’s in the pill bottles, the food insecurities, and the lifestyle of the person that affects up to 80% of health outcomes.
That’s what we discovered early on. The service, we started as an on-demand, “My kid is sick. Come to my house.” It has a fundamental ability to transform healthcare by serving the worried well but focusing on chronic disease patients who cost the most in healthcare, and who are often socioeconomically disadvantaged, going into their home, delivering them great care, understanding the context of their lifestyle, and helping them and their insurance partner save money by improving health outcomes.
That’s what I’m most interested in. I’ve been fascinated by this idea. I never understood how economics would work. The last years of my career had been in healthcare, specialty orthopedics, and neurosurgery selling devices and services. There’s the fee-for-service model. I didn’t understand how you could make it work where a nephrologist would drive twenty minutes across town, park, and have all that downtime. How did you approach that problem initially? What did you learn?
The fee-for-service model and the commercial fee-for-service model don’t work, but the fee-for-service isn’t good for healthcare and getting Heal because it focuses on volume over value. The goal of a doctor should not be to see as many patients as possible per day. The goal should be to improve the health of each patient they see in a quantifiable way. A doctor sees me and it’s like, “Nick, you called me for your sore throat. That’s fine,” but they don’t have the time to understand if my sore throat is because of reflux which will eventually turn into this, or I’m prediabetic or whatever the case may be.
That’s a missed opportunity. Doctors are put in a position where they’re on a treadmill of patients. They can’t focus on that despite the fact that they have the skills to do that. If that doctor spent more time with me and identified my diabetes, it costs $5,000 a year to treat a diabetic, $20,000 a year to treat a chronic kidney patient, and $100,000 a year to treat someone on dialysis. We want to arrest that progression and slow that down. The way to do that is through comprehensive and coordinated care from a PCP who has the time to deliver the care that the patient needs to achieve better health.
The PCP is a key role there.
The whole service is built around the PCP.
In the case of Heal, one of the commercial competitors made a very significant investment. Is that something you can talk about? An insurance company that benefits from better care and lower costs sees value in what Heal is doing. How did you begin that discussion?
The big investor we got an RD around was Humana. We were thrilled to get that investment. We originally met them in December of 2019 at their offices in Louisville, Kentucky. We had a meeting in which we resonated. They had a vision for home-centric care. They showed us a video about it and then we showed them a video of what we do now. What we were already doing was exactly their vision. They quickly began an exhaustive and extensive due diligence process that took six months.
In July of 2019, they closed their investment in Heal. It was a huge win. It took a long time. To say their due diligence is exhausting is the understatement of the year but it was worth it. They’re an incredible partner. We’re thrilled to have them. One of the big moments of my career is landing them as an investor and partner because they’re not just an investor. They’re an investor, a customer, a partner, and an advisor. They can do all kinds of things that we would want all in one company. We were excited by that.
They have invested $100 million. If that was an exit, that’s a significant amount. Did they ever say, “Can we buy the whole company?” They would seem like the natural acquirer of the business.
I will answer that question in more general terms. Public companies typically don’t buy smaller private companies unless they’re EBITDA profitable because they don’t want to take any hit to the P&L. An investment allows them to have a minority stake in a company and make a balance sheet investment without impacting the P&L. That’s a general public company viewpoint.
In a general view, if a private company then gets to scale and becomes profitable where it won’t be a drag on earnings, that would be the natural time when a strategic investor would acquire. This is interesting. If you could see five years from now your vision of where Heal will be, I know you will be onto your next exciting startup that will probably be as big or bigger, but where do you see Heal in five years?
The doctor’s office is dead. My eldest son is seven years old. I don’t think he’s ever going to learn how to drive a car because, with autonomous vehicles and services like Uber, he’s not going to need to. He already doesn’t know what a DVD or a CD-ROM is because there’s streaming content. I don’t think he’s ever going to need to go to a doctor’s office, God forbid, if something serious happened, surgical needs, or acute emergency needs. Telehealth is accelerating that too. We’re going to decouple care from a physical location to be patient-centric and in the home.
You heard it here, folks. Heal is going to decouple healthcare. The doctor’s office is dead. In my take, it sounds like the combination of telemedicine and comprehensive home care will change healthcare. We’re going to end by going to the volt, Nick. Here’s the first question. In your education, childhood and early career, who is one person other than your parents that saw potential in you and encouraged you to dream big?
In the early days of my life other than my parents, it was my oldest and dearest friend Krishna Shenoy. Through high school and in my first year of college, I was a problem student. I ditched class and talked back to the teachers. I was bored out of my mind. I don’t mind saying I have intellectual gifts. I was able to do well without much work. I nailed it in.
I met him in my sophomore year of Engineering school at UC Irvine. He was such an inspiring guy. Without saying anything, he made me understand that the opportunity to do well was an obligation to do well. I had the responsibility to realize the potential of my gift. We’re still friends many years later. He’s an endowed Chair at Stanford University and one of the world’s leading researchers in neuroprosthetics. He’s the father of two amazing girls. We’re very close friends to this day.
That’s wonderful and inspiring. Thank you. Here’s the second question. What book, poem, piece of art, movie, documentary or something you saw in the last twelve months that had an impact on you and has changed the way you would think?
I saw a documentary about extremely poor people in India where I’m originally from that live in these slums. You can’t imagine what these slums are like. They are trying to escape by being entrepreneurial. There’s one of the guys in this story. In Kolkata, there’s a gold market. Gold jewelry is very popular in India. He used to work for a guy who would sweep the streets after the goldsmiths all went home to capture the dust of gold that fell off their clothes to resell it. He had the idea, “It rains a lot in the city. Some of the gold is ending up in the gutter.”
He would get up in the middle of the night or 4:00 in the morning and lower himself into this crap-filled gutter to capture crap. For every ton of crap he would capture, he got 7 grams of gold. He used this process to escape extreme poverty and build a business. I grew up in Orange County, California. My parents are educated. I lived in a safe house. I have a wonderful wife and a great kid. I have every iota privilege you can imagine. That drive and hunger that drive entrepreneurs reminded me of how important it is to stay hungry and focused, and dream big.
Do you recall the name of the documentary?Hard work is critical to success. And fewer people are motivated by it. We should not want to go all-in on this because it's a job. We should be all in on this because it's our opportunity to change the world for the better. Click To Tweet
There are a lot of documentaries about the slums in India. I don’t remember this one. I can find it and email it to you.
I want to watch it. Here’s the third question. In your day-to-day work as an entrepreneur and as a founder, what’s the one technological tool that you use the most and you couldn’t live without?
There’s a lot in that category but if I had to say one, it’s the smartphone. I can do my email and text here. I can read, edit, and sign documents here. I can order food, coordinate rides, and do everything that happens here. This is an indispensable asset.
Is there one application on your phone?
The application on my phone that I use the most is Uber.
You’re a man on the move. Here’s the final question. In your experience building Heal and for what you imagine you will do next, what do you see as the biggest unmet need as an entrepreneur?
Is it the need for me as an entrepreneur or the need in healthcare?
The need for me as an entrepreneur is how hard it is to find equally motivated and hardworking people. There’s a phrase at startups I’ve been at and others, “If you don’t come in on Saturday, don’t even bother to show up on Sunday.” It’s basic. There’s a lot of talk about work-life balance. I have three kids and balance is important. I’m not telling anyone to work to death but I do think that hard work is critical to success. Less and less people are motivated by, “I don’t want to go all-in on this because it’s a job. I want to go all-in on this because it’s my opportunity to change the world for the better.”
Uber, Netflix, Grubhub and Airbnb are used by tens of millions of people. The most successful health-tech apps are used by a few hundred thousand people. Why? Who’s going to make the first healthcare app that 50 million people use? What is it? What function, utility and value will that have to deliver to cross that usability, usefulness and user scale?
I don’t know where Calm is right now. Would you consider Calm a healthcare app?
I would consider Calm a wellness app. There are tools like Calm, Noom, and stuff that are broadly connected to healthcare and are technology-only driven tools. I’m talking about healthcare services tools. Calm is something you might use in addition to your PCP and your nephrologist if you’re a chronic kidney disease patient. There are 40 million chronic kidney disease patients. You probably wouldn’t find an app that more than half a million of them are using. Calm, Headspace, and some of these companies come into the space, but they’re out here and not at the core of clinical care delivery.
Nick, thanks so much for being on the show. I enjoyed the conversation.
Thank you. This was awesome.